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Loan waiver to farmers will push Maharashtra's fiscal deficit

CM Fadnavis has indicated possibility of waiver for Rs 30,000 cr of dues in this category of farmers

Dilip Kumar Jha & Abhijit Lele  |  Mumbai 

Farm loan waiver to push Maharashtra's fiscal deficit

A by the government of Maharashtra would have a substantial effect on its finances.

India Ratings says a waiver of the Rs 30,000 crore owed by small and marginal farmers would push up the government's fiscal deficit by 2.7 per cent in 2017-18, from the budgeted 1.53 per cent of gross state domestic product (GSDP). To manage this, it might have to cut on capital expenditure, their report added.

"The debt/will rise to 17.44 per cent against the budgeted 16.26 per cent in FY18. The impact will depend on whether the entire loan waiver is absorbed in FY18 or is staggered over three to four years," said the report.

Chief Minister has indicated the possibility of waiver for the Rs 30,000 crore of dues in this category of farmers. The state has budgeted for debt stock of Rs 412,992 crore for FY18. With the waiver, this will rise to Rs 442,992 crore.

The share of capital expenditure in total spending averaged 16.6 per cent during FY10-17 (revised estimate). Deficits in the revenue account persisted during this period, due to large interest payments. Interest payment (Rs 34,127 crore) to revenue expenditure is budgeted at 13.75 per cent for FY18. Allocation for capex is 15.21 per cent of total expenditure in FY18, India Ratings said.

"The pressure on Maharashtra's fiscal position would be less intensive if the waiver is absorbed in state finances in a staggered manner. The fiscal deficit would increase by 29.5 basis points (bps) to 1.82 per cent of in FY18 if the waiver is phased equally (Rs 7,500 crore annually) over a four-year period. In this scenario, the fiscal deficit to percentage is estimated to increase by 22-27 bps over FY19-21. However, despite the fiscal deficit expansion, it is likely to remain within the 14th Finance Commission's prescribed limit of three per cent of GSDP", said the report.

First Published: Sat, June 10 2017. 09:16 IST